Hospital Merger Prompts Upgrade

CHICAGO — Pennsylvania-based Catholic Health East won its second upgrade in as many weeks following its spring merger with Michigan-based health care giant Trinity Health.

Fitch Ratings last week upgraded CHE's debt to AA from A-plus. It also affirmed its AA rating on Trinity Health Credit Group.

Fitch is the second ratings firm to upgrade CHE after the merger with Trinity last May that formed the group now known as CHE Trinity Health Inc. Moody's Investors Service last week boosted its rating on CHE to Aa2 from A2 to match Trinity's rating. But Moody's revised its outlook on the new system to negative from stable.

The negative outlook on the new system is due to the lack of a permanent executive team, the potential for partnering with other, weaker credits, and other factors, Moody's said.

The ratings actions come as CHE Trinity is expected to issue $305 million of bonds later this month. The bonds will be issued under a new structure that essentially expands Trinity's obligated group to include CHE.

The two providers formally merged last May. The partnership created the second-largest nonprofit health care system in the country, with 82 hospitals across 21 states and $13.3 billion of annual revenue. Only St. Louis-based Ascension Health is larger.

Its maximum annual debt service totals just under $295 million, or 2.2% of revenue, which Fitch considers strong for the double-A ratings category.

The system plans nearly $4 billion in capital spending over the next three years, according to ratings analysts.

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